Mahindra Two Wheelers tries to recover

Company aims to reduce losses to below ~1 bn this year by cutting costs and focussing on the premier segment

Mahindra Two Wheelers (MTWL), the ailing subsidiary of Mahindra & Mahindra (M&M) , is trying to re-invent itself. The aim is to reduce its loss in this financial year to below ~1 billion; it lost ~4.7 billion in 2016-17. It plans to launch variants of its Mojo premium motorcycle in the coming quarters; it also has a new BSA bike in the works, apart from a Jawa motorcyle.

Mahindra Two Wheelers (MTWL), the ailing subsidiary of Mahindra & Mahindra (M&M) , is trying to re-invent itself. The aim is to reduce its loss in this financial year to below ~1 billion; it lost ~4.7 billion in 2016-17.

It plans to launch variants of its Mojo premium motorcycle in the coming quarters; it also has a new BSA bike in the works, apart from a Jawa motorcyle (expected in FY19).

Mahindra’s two-wheeler business started with the acquisition of Kinetic Motor Company’s assets in 2008. However, it has seen falling sales and mounting losses over years. Several of its products (Pantero motorcycle, Duro DZ, Rodeo RZ, Kine scooters) failed to make a mark and were discontinued around 2015. Sales revenue dipped 93.5 per cent in FY16. Last year, the company announced it had decided to move away from commuter segment motorcycles and scooters; it would, instead, focus on the premium segment. A good move, say analysts, as it is tough for a new player to compete with established ones in the competitive commuter segment. More so as the 100-125cc motorcycle market has come under threat from scooters of late.

Prakash Wakankar, chief executive officer for the twowheeler business, detailed several moves already made to pare costs and reduce loss. With the Kinetic acquisition, its field force and the manufacturing plant (Indore) had come to Mahindra. A voluntary retirement scheme (VRS) was announced at the plant in 2015, which many opted for. Many older employees are also in turn for retirement. “There are benefits of being a part of a large conglomerate. As cost rationalisation, several employees from the twowheeler business have been absorbed in other lines of businesses,” said Wakankar. The company has also reduced spending on major marketing events and advertising. Is using the digital space more and working with dealers in their catchment areas for promotional events. “Advertising and marketing initiatives are more targeted now,” he said.

With the decision to move away from the commuter segment, there is no cost of new product development for the mass segment. The development of new premium products (BSA and Jawa stable) is happening through a separate subsidiary, Classic Legends (CLPL). Mahindra had acquired the BSA brand through CLPL, which also has a brand licensing arrangement with Czech motorcycle maker Jawa for a few markets, including India.

These moves, however, will not affect the accumulated loss of ~28.7 billion, conceded Wakankar. “Moving towards premiumisation is the way forward for that,” he said.

Its only premium offering in the Indian market, the Mojo, has not done well of late. Its sales slipped to almost half during the first nine months of this financial year, to 561 units (from 1,050 in the previous period). Disappointing, agreed Wakankar.

After the strategy of moving away from the mass segment was announced, there was some apprehension among dealers. “All our dealers did not have the Mojo this year. We also opened five exclusive dealerships for the Mojo recently, which would offer a unique experience to customers,” said Wakankar.

The company planned to launch the Mojo UT, a more affordable variant. Two more variants are in the works.

Wakankar said the company had maintained that every existing owner of a Mahindra two-wheeler would continue to get service and spares. Of the 362 service centres last year at this time, 336 remain. Sales points have reduced, from 315 last year to 184 now.

“We are not driving out any dealership or asking them to close. In fact, we continue to make and sell the Gusto and the Centuro range here,” he said. Some dealers have opted to go for Mahindra First Choice Wheels, the used vehicle brand, which recently began selling used two-wheelers.

He said he did not wish to give details on whether there would be a new chain of dealerships for the premium range. With the Jawa motorcycles (expected in FY19) to be launched under the same brand, that would not bear the Mahindra name, one might expect a new chain of dealerships. As for the mass segment offerings ,Gusto and Centuro, there was no plan to pull the plug. “Almost 50 per cent of the production is exported and in FY18 we entered some new markets (East Africa). So, there is no plan to stop production at our factory at the moment,” Wakankar said. Mahindra exports these vehicles to eight markets.